just a little scary

Better Half and I are considering putting down an offer of a whole bloody lot of money on a new house within the next week or so… Unfortunately, this possibility is scary from multiple directions.
First, our offer is about 20% under what they are asking, so to say we would be “low-balling” would be putting it mildly. However, after having gone through the house three times (one of those times with her parents), we can honestly say that the house really does need that much work. Retaining walls are giving out, the driveway is at an absurd angle and would need to be regraded, the front yard is packing its bags and heading for flatter terrain, there is water damage inside the house from a leaking pipe, the decks (of which there are many, and they have outstanding views) were constructed with untreated wood and are doing what untreated wood does when exposed to the elements for years, most of the inside of the house is wired with two-plug outlets, all of the carpet would have to come out (we think there are hardwood floors underneath, though – thank God), the siding of the house needs some serious attention (though the cypress siding was put on over a brick house, 40 years ago – riddle me that)… the list goes on.
Second, that list is bloody scary – all that work would have to be done at some point, by either my effort, or my money (which basically boils down to “my effort” in either direction).
Third, holy crap, that is a significant fraction of a million dollars! That is a gorramed lot of money, especially in these financially uncertain times.
However, as for the pluses, we would basically never have to move again – the house has around 4000 square feet, giving us ample room for expansion, and whatever else we want. The six bedrooms could be collapsed to five, giving us a master suite the size of one side of the house, and then possibly to four, giving me a hybrid gun-room/wine cellar. The three acres it sits on are impossibly hard to find in our region, and the acreage is situated on a small hill overlooking most of the valley in front of it (it has a great view of the sunsets). It is placed near some outstanding public schools (almost oxymoronic, but it holds true in this case), which is not terribly important to us at the moment, but helps with potential future resale (as well as potential future developments). And the house itself has some relatively nice features… apart from the loads of work that have to be done to it.
The good news is that the current owners purchased the house about five years ago for what we are offering them, so it is technically a zero-sum game for them – apart from the multiple-thousands they sunk in their kitchen (though neither Better Half, nor her parents, nor our realtor, nor I know exactly where). The bad news is that the house was initially listed at almost 40% more than we are offering, and only came down about a month ago.
Gosse… this house-buying nonsense is complicated!